Irish residential rents inch up in January 2013

This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for January 2013. The monthly headline Consumer Price Index (CPI) fell by 0.5% compared to December 2012, and is up just 1.2% year-on-year. January’s results mirror those of December, November, October and September and continue a subdued trend seen in recent months compared with the 2%+ that pertained before January 2011.

Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 9.6% in the past year, as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for over 5% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes on the other hand, which account for over 5% of the total basket examined by the CSO, have risen by 6% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.

Elsewhere, private rents rose by 0.1% in the month of January 2013 – this after a 0.7% increase in December, 0.6% increase in November 2012, 0.7% monthly increase in October 2012 and a 0.9% increase in September 2012, a flat month in August and three months of declines in April-June followed by a small increase in July – and over the past year, such rents are up by 3.4% according to the CSO – there is some small rounding in the figures above which show 3.5%.

It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 6.8% increase (mostly recorded in February and October 2011 and February and September/October/November 2012).

Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.

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5 Responses

I thought rent assistance was being withdrawn to some degree, and on that basis you expected declines in rents in the private sector – that was the view in a few of your posts late last year.

I’m in the UK and there’s an ongoing debate about the effect housing benefit has on private sector rents, which can be very expensive. The present gov has adjusted the percentiles for assessment of local authority calculations of HB, but we’re still scratching our heads about what to expect.

@SG, you’ve lost me there. There were reductions to rent assistance levels in January 2012, that is, 13 months ago, and they did indeed appear to bear down on rent levels in the first half of 2012, but there has been reasonably robust growth in H2,2012 – still just 3-4% per annum, mind.

@SG, yes the private rents market seemingly turned in H2, 2012 and it seems the rent assistance reductions only had an impact in H1,2012.

As for affordability, difficult to say, but I would wager that rent is now less affordable. Although the increase is just 3-4%, many sectors are seeing flat gross earnings, some like Dunnes’ staff are seeing 3% increases this year, but most will suffer the €264 PRSI increase, some will suffer the cut to childrens’ allowance and inflation is just over 1%. So I would guess private rents are slightly less affordable.